How to Participate in the Great Resignation without Putting Your Retirement at Risk

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Whether you call it a labor scarcity, a work crisis, or The Great Resignation, the trend is clear: people are abandoning their jobs in droves Consolidation Now.

According to the Bureau of Labor Statistics, 4.3 million Americans resigned in August, owing to their bolstered savings balances and lingering health concerns in the aftermath of the epidemic. In the United States, there are 10.4 million job opportunities, giving employees the upper hand in the labor market.

“People are reprioritizing their priorities and the social contract they have with their employers,” says Sri Reddy, Principal’s senior vice president of retirement and income solutions.

It’s tempting to get caught up in the excitement, but experts warn that what you do now might have a long-term effect on your money. Think about the long-term implications for your retirement before you smash that passionately written resignation letter on your jerk of a boss’s desk – even if that’s decades away.

Get ready to take the plunge.

Before quitting your present job, Katherine Tierney, senior retirement planner at Edward Jones, advises you to know where you’re heading next. If you’re transferring firms, start looking for a new position. If you’re beginning your own company, make sure you have your finances, location, and documentation.

Then, Tierney advises, “examine your finances to ensure you can financially support your future relocation.” During the transition, this involves continuing to save for long-term objectives like retirement. Any pause in your retirement savings now might lead to substantial losses later.

Ideally, you should have three to six months’ worth of vital costs tucked away in an emergency fund. (FYI: If you’re going freelance after The Great Resignation, you may want a year’s worth.) If anything unfortunate occurs, you won’t have to use money set aside for retirement.

Pay attention to the small print.

According to the Bureau of Labor Statistics, two-thirds of private-sector employees have access to employer-sponsored retirement plans. They may, however, come with a catch, according to Reddy.

If you’ve been making 401(k) contributions, that money is yours. If your company has been matching that, you may not fully own it until a set period has elapsed. Companies often follow what’s known as a 401(k) vesting timeline to attract workers to stay longer. Look up those dates.

“You want to be very cautious because you might be leaving thousands of dollars on the table if you’re just a few months here or there,” Reddy says.

Other benefits, such as tuition reimbursement or student loan aid, may be affected if you leave a job sooner. Check your job agreements for repayment terms and speak with human resources to see whether your leave implies you’ll be responsible for money you received from the firm before.

Consider factors other than pay.

Ross Cohen, a wealth adviser and certified financial planner at Bartlett Wealth Management advises against getting too excited about a new job’s income. Consider fundamental criteria such as the company’s location and remote work policies. After that, go through the complete remuneration package, including 401(k) plans, profit-sharing schemes, and stock options.

Consider the temporal horizon here as well. You may not be around long enough to realize the benefits if you merely utilize the position as a stopover.

According to Reddy, paying great attention to healthcare benefits is essential. Switching insurance carriers might be costly, particularly if you or a family member has a medical condition requiring access to certain physicians or treatments. “Your basic pay may not reflect what your expenditures will be in certain circumstances,” he says.

Take good care of your 401(k) plan (k)

Check on your 401(k) when you’re ending a job (k). If you’ve borrowed against it, be very cautious.

Every 401(k) plan has its unique rules, but “a lot of those loans become due immediately if you quit [your employment],” Reddy adds. If you don’t pay back the money, the IRS considers the offset a disbursement, which comes with a 1099-R, taxes, and a penalty depending on your age.

Another thing to think about is your 401(k) balance. Assuming it’s less than $1,000, employers will usually simply send you a check, which will trigger the tax consequences and penalty until you transfer it over into your new 401(k) or an individual retirement account (IRA) within 60 days, if the plan sponsor permits it.

According to Cohen, consolidating your retirement money into a single account will help you avoid “having these little accounts lurking out there,” according to Cohen. It could also help you develop a more thorough approach and investment plan.

Follow your heart’s desire.

Take advantage of the Great Resignation to ensure you’re in a job that corresponds with your interests. If nothing else, the more you like your work, the longer you’ll remain there — and the more minor modifications to your retirement plan you’ll have to make.

Tierney suggests doing the math to ensure you’re saving enough to support your retirement lifestyle. If your new job provides you with extra money, you may want to change your strategy. Yes, increase your 401(k) contributions and conduct introspection: What brings you the greatest happiness?

Tierney adds that changing employment may give “a chance to retire early or accomplish things in retirement you weren’t even thinking about before.”

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